A report on Indian marketplaces by research firm Bain & Company in partnership with venture capital firm Accel has said that the venture funding environment is expected to continue seeing a slowdown in the near term for all major marketplaces across categories like e-commerce and fintech.
The report says that going forward, investors are likely to focus more on proven models and experienced founders, potentially entering into more late-stage deals with higher round sizes. Dealmaking is likely to be more measured and valuation multiples will see some degree of rationalisation.
It is being said that this is similar to what is happening across the start-up ecosystem in India as well as globally as macroeconomic conditions have worsened over the past many months.
The report also adds that funds in India are anticipating corrections from last year’s high valuations; valuation multiple compressions in the US markets are expected to trickle into some sectors.
Amidst such a tough funding environment, investors are likely to only fund marketplace start-ups helmed by founders who already have the experience of running a marketplace.
Anand Daniel, Partner at Accel said, “If someone is starting a new marketplace, if they’ve learned from working at an existing marketplace, it gives an edge, especially when markets are slower.”
The report also said existing marketplace-based tech companies and newer ones will primarily see growth by expanding into newer territories beyond Tier-3 cities and even by going abroad.
Prabhav Kashyap, Management Consultant at Bain & Company said, “What we are referring to is an India for the world marketplace model, and the reason why we like it is that because this whole manufacturing exports is going to be a massive opportunity.”
The report also highlights that India’s total online marketplace gross merchandise value (GMV) will reach US $ 350 billion by 2027 from the current US $ 100 billion.
Marketplaces in the B2B e-commerce space are expected to diversify into more categories, vertically integrate and also enter cross-border trade to capitalise on China+1 sentiment. Apparel Resources